/raid1/www/Hosts/bankrupt/TCRLA_Public/220203.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, February 3, 2022, Vol. 23, No. 19
Headlines
A R G E N T I N A
ARGENTINA: IMF Reaches Understanding on Fiscal Path for Deal
ARGENTINA: January Inflation Close to 4%, Economists Say
B A H A M A S
COMPANHIA ENERGETICA: Feb. 15 Shareholder Meeting on Merger Issues
B R A Z I L
ACHE LABORATORIOS: Fitch Affirms 'BB' LT FC IDR, Outlook Negative
BRAZIL: Decree OK'd Allowing Retaliation on Trade Disputes
C H I L E
LATAM AIRLINES: Creditors' Panel Disagrees pm Negotiation Process
C O L O M B I A
CONCESION RUTA: Fitch Keeps 'BB+' After El Condor Ratings Cut
D O M I N I C A N R E P U B L I C
[*] DOMINICAN REPUBLIC: Government Seeks Deals With Qatar
J A M A I C A
[*] JAMAICA: Economy Recovering From COVID-19 Impact, PM Says
M E X I C O
DER NEUE: Fitch Withdraws Ratings
MEXICO: Finance Head Says Talk of 'Technical Recession' Imprecise
- - - - -
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A R G E N T I N A
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ARGENTINA: IMF Reaches Understanding on Fiscal Path for Deal
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globalinsolvency.com, citing Bloomberg News, reports Argentina and
the International Monetary Fund have reached an understanding on
when the nation will achieve a balanced primary budget, marking a
first key step to renegotiating more than $40 billion of debt.
The agreement comes after talks intensified following months of
delays. Argentina reportedly plans to make a payment of more than
$700 million due Jan. 28, according to globalinsolvency.com.
The parties have agreed for the country to reach a balanced primary
budget -- that is, a budget without including interest payments --
in 2025, the report notes. The nation's Economy Ministry and IMF
staff are expected to continue discussing details of the program.
IMF staff plan to brief the lender's board of directors on the
state of negotiations in an informal meeting in Washington,
according to a person with direct knowledge of the matter, the
report says.
About Argentina
Argentina is a country located mostly in the southern half of South
America. The capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Standard & Poor's credit rating for Argentina stands at CCC+ with
stable outlook, which was a rating upgrade issued on Sept. 8, 2020.
Moody's credit rating for Argentina was last set at Ca on Sept.
28, 2020. Fitch's credit rating for Argentina was last reported on
Sept. 11, 2020 at CCC, which was a rating upgrade from CC. DBRS'
credit rating for Argentina is CCC, given on Sept. 11, 2020.
As reported by The Troubled Company Reporter-Latin American, DBRS
noted that the recent upgrade in Argentina's ratings (September
2020) follows the closing of two debt restructuring agreements
between the Argentine government and private creditors. The first
restructuring involved $65 billion in foreign-law bonds. The deal
achieved the requisite participation necessary to trigger the
collective action clauses and finalize the restructuring on 99% on
the aggregate principal outstanding of eligible bonds. DBRS added
that the debt restructurings conclude a prolonged default and
provide the government with substantial principal and interest
payment relief over the next four years.
DBRS further relayed that Argentina is also seeking a new agreement
with the International Monetary Fund (IMF) to replace the canceled
2018 Stand-by Agreement. Formal negotiations on the new financing
began in November 2020. Obligations to the IMF amount to $44
billion, with major repayments coming due in 2022 and 2023.
ARGENTINA: January Inflation Close to 4%, Economists Say
--------------------------------------------------------
Rio Times Online reports that inflation shows no signs of slowing
and is on track to end the first month of the year with an increase
of almost 4%.
It will be two weeks before Indec releases the official figures for
January, Rio Times Online notes.
Still, private readings warn that after hovering around 3% per
month for several months, the cost of living may have taken another
step up to 4%, the report relays.
Food continues to be the main driver of the increase, the report
adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. The capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Standard & Poor's credit rating for Argentina stands at CCC+ with
stable outlook, which was a rating upgrade issued on Sept. 8, 2020.
Moody's credit rating for Argentina was last set at Ca on Sept.
28, 2020. Fitch's credit rating for Argentina was last reported on
Sept. 11, 2020 at CCC, which was a rating upgrade from CC. DBRS'
credit rating for Argentina is CCC, given on Sept. 11, 2020.
As reported by The Troubled Company Reporter - Latin American, DBRS
noted that the recent upgrade in Argentina's ratings (September
2020) follows the closing of two debt restructuring agreements
between the Argentine government and private creditors. The first
restructuring involved $65 billion in foreign-law bonds. The deal
achieved the requisite participation necessary to trigger the
collective action clauses and finalize the restructuring on 99% on
the aggregate principal outstanding of eligible bonds. DBRS added
that the debt restructurings conclude a prolonged default and
provide the government with substantial principal and interest
payment relief over the next four years.
DBRS further relayed that Argentina is also seeking a new agreement
with the International Monetary Fund (IMF) to replace the canceled
2018 Stand-by Agreement. Formal negotiations on the new financing
began in November 2020. Obligations to the IMF amount to $44
billion, with major repayments coming due in 2022 and 2023.
=============
B A H A M A S
=============
COMPANHIA ENERGETICA: Feb. 15 Shareholder Meeting on Merger Issues
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Companhia Energetica De Sao Paulo provides an updated on the
proposed reorganization which aims to consolidate into a single
entity certain energy assets owned by the Company's indirect
controlling shareholders, Votorantim S.A. and Canada Pension Plan
Investment Board, including the investment in the Company.
On October 21, 2021, the Company appointed the Special Independent
Committee, in compliance with CVM Guidance Opinion No. 35 to
negotiate with its controlling shareholder's management, VTRM
Energia Participacoes S.A., the transaction involving a merger of
all of the shares issued by the Company by VTRM, excluding the
shares that, on the effective date of the merger of shares, (a) are
held by VTRM, (b) are in CESP's treasury, or (c) have been subject
to the exercise of the right of withdrawal by CESP's shareholders.
On January 10, 2022, the Independent Committee submitted to the
Company's Board of Directors its recommendation for the proposed
exchange ratio of the shares issued by CESP for shares issued by
VTRM related to the Merger of Shares, which was unanimously
approved by the Company's Board on the meeting held on January 7,
2022.
On a meeting held on January 21, 2022, the Company's Board
approved, among other matters:
(i) the execution, between the Company and its controlling
shareholder, VTRM, of the Private Instrument of Protocol and
Justification of the Merger of Shares (Instrumento Particular de
Protocolo e Justificacao de Incorporacao de Acoes da CESP -
Companhia Energetica de Sao Paulo pela VTRM Energia Participacoes
S.A.), which sets forth, among other matters, the terms and
conditions for the Merger of Shares; and
(ii) the calling of the extraordinary shareholders meeting of
the Company to be held, at first call, on February 15, 2022, to
resolve, among other matters, upon the Merger Protocol, the exit by
the Company of the Nivel 1 listing segment of B3 S.A. - Brasil,
Bolsa, Balcao ("B3") and other matters related to the Merger of
Shares ("ESM").
According to the Merger Protocol, to optimize the market value of
VTRM shares, stimulating liquidity and the least impact of price
fluctuations, after the VTRM Transaction and before the completion
of the Merger of Shares, a grouping of VTRM shares will be carried
out, so that 4,253509378 VTRM shares will be grouped into 1 share,
without changing VTRM's capital stock.
By force of the Reverse Stock Split, the Exchange Ratio approved on
the BDM 01.07.22 will be adjusted proportionately, being all of
such adjustments already reflected on the Merger Protocol for all
purposes.
Still, pursuant to the Merger Protocol, upon the completion of the
Merger of Shares, the Company's shareholders will receive, in
consideration for the merged shares issued by the Company held by
them, new common and redeemable preferred shares issued by VTRM.
The VTRM Redeemable Preferred Shares will be immediately and
compulsorily redeemed, in consideration for a cash payment to
shareholders.
Pursuant to the Merger Protocol, the Merger of Shares and the
Redemption are interdependent and linked events, the effectiveness
and consummation of which will be subject to applicable corporate
approvals and the implementation of certain conditions precedent,
including, among other usual conditions for this type of operation:
(i) the listing of VTRM as a Category "A" publicly held company
with the Comissao de Valores Mobiliarios ("CVM"); (ii) the listing
of VTRM on B3 and the admission of its shares to be traded at Novo
Mercado, subject to the Redemption; (iii) the completion of certain
steps of the Reorganization, including the transfer to VTRM, by VSA
and CPPIB, of certain assets and cash; and (iv) the approval of the
Merger of Shares by the debenture holders of the 11th and 12th
debenture issuance of the Company, pursuant to the terms and
conditions provided in the respective deeds, or the redemption of
the mentioned debentures, pursuant to the applicable terms and
conditions set out in the respective deeds.
If approved by the ESM, the Merger of Shares will be conditioned
upon and shall only be effective upon the satisfaction (or waiver,
as applicable) of the Conditions Precedent, to be verified and
declared by the Company and VTRM's Board of Directors.
Upon the completion of the Merger of Shares, the Company shall
become a wholly owned subsidiary of VTRM, and the totality of the
issued shares will be held by VTRM, without any modification in the
Company's capital stock.
The information and documents related to the calling of the ESM,
including the Management Proposal, the Merger Protocol and the
opinion of the Fiscal Council regarding the Merger of Shares, will
be timely disclosed to the shareholders, under the terms and
deadlines of the applicable legislation, and made available in the
electronic pages of CVM (https://www.gov.br/cvm), of B3
(http://www.b3.com.br)and of the Company
(https://ri.cesp.com.br/).
The Company reaffirm its commitment to keep shareholders and the
market in general informed about the progress of the transaction
and any other matters that may be of interest to the market.
About Companhia Energetica
Sao Paulo, Brazil-based Companhia Energetica de Sao Paulo is the
largest producer of electricity in the state of Sao Paulo. It owns
and operates six hydroelectric plants integrated into the National
Interconnected System.
As reported in the Troubled Company Reporter-Latin America on July
21, 2021, Fitch Ratings has affirmed Companhia Energetica de Sao
Paulo's (CESP) Long-Term (LT) Foreign Currency (FC) and Local
Currency (LC) Issuer Default Ratings (IDRs) at 'BB' and 'BB+',
respectively.
Fitch has also affirmed the LT National Scale Rating at 'AAA(bra)'
for CESP and its senior unsecured debentures issuance. The Outlook
for the LT FC IDR is Negative, while the Outlook for both the LT LC
IDR and the National Scale Rating is Stable.
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B R A Z I L
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ACHE LABORATORIOS: Fitch Affirms 'BB' LT FC IDR, Outlook Negative
-----------------------------------------------------------------
Fitch Ratings has affirmed Ache Laboratorios Farmaceuticos S.A.'s
Long-Term Foreign Currency (FC) Issuer Default Rating (IDR) at
'BB', Long-Term Local Currency (LC) IDR at 'BBB' and National Scale
Rating at 'AAA(bra)'. The Rating Outlook is Negative for the FC and
LC IDRs and Stable for the National Scale Rating.
Ache's ratings reflect the defensive nature of the pharmaceutical
industry with low levels of cash flow volatility and the company's
leading position in the Brazilian prescription drug segment. The
ratings also incorporate Ache's low product portfolio risk, with no
relevant exposure to patents or licenses, and the company's
commitment to an unleveraged capital structure, while managing its
growth plans with its resilient FCF generation before dividends.
Ache's sustainable market position, reinforced by its large sales
team, gives the company a key competitive advantage in reaching out
to the medical community and building brand awareness.
KEY RATING DRIVERS
Positive Industry Fundamentals: The pharmaceutical industry has
positive long-term fundamentals, in light of the aging world
population and increasing access to health systems. The sector has
consistently outperformed the growth of the Brazilian economy. In
the last four years, the Brazilian pharmaceutical market reported
an average annual increase of 12%, above the rate of Brazilian GDP
growth, indicating resilient demand even in adverse macroeconomic
conditions.
The higher incidence of chronic diseases and the need to invest in
new treatments will continue to boost consumption of medicines in
the future. Longer term, increased competition and the maturing of
patents may generate some price pressures, as it occurs with
generic drugs.
Solid Business Profile: Ache has a solid and recognized brand in
the Brazilian pharmaceutical industry. The company's diversified
product portfolio, leadership in the prescription drug segment and
presence in the fast-growing over-the-counter (OTC), generics and
dermo cosmetics segments support its sound business profile. Ache
is the fifth-largest retail pharmaceutical company in Brazil and
has one of the largest sales forces in the domestic market. This
gives the company a key competitive advantage over local and
international peers, as it allows for extensive outreach to the
medical community, a crucial demand driver for prescription drugs.
Low Product Portfolio Risk: Ache's operating cash flow is not
significantly exposed to license renewals or patent expirations.
Similar to other emerging markets pharmaceutical companies, Ache
has a narrower R&D product pipeline than those of its multinational
competitors and a weaker portfolio of patented products.
Positively, the company's exposure to licensing agreements is low,
representing less than 8% of revenue. Ache's ability to maintain a
sustainable volume of product launches each year and to increase
the share of innovations in its portfolio will be key factors in
preserving its competitive position.
Competition Remains Tight: Competition with local pharmaceutical
companies remains tight with local competitors acquiring brands
from multinationals, expanding their generic product reach across
segments or therapeutic classes, and with aggressive commercial
conditions. Fitch expects Ache's EBITDA margins at 25% in 2021,
lower than the 28% average between 2015 and 2019, as the company
seeks to defend its position in the prescription drugs segment and
to increase its presence on generics, OTC and special care.
CFFO to Remain Sound: Ache's pre-dividend FCF will remain robust.
Fitch forecasts EBITDA of BRL990 million and cash flow from
operations (CFFO) of BRL774 million in 2021, increasing to BRL1.1
billion and to BRL871 million in 2022, and with a growing trend
onwards. Base case scenario incorporates capex at BRL804 million in
2021-2023, mostly related to the new plant in Pernambuco, which
will lead to around 50% expansion in the company's production
capacity. FCF is expected to be negative BRL13 million in 2021 and
positive in 2022. Fitch estimates average annual dividends ofBRL554
million from 2021 to 2023, corresponding to approximately 75% of
net income.
Unleveraged Capital Structure: Ache has maintained low leverage
ratios and strong credit metrics. Net debt/EBITDA is projected to
remain below 0.6x and FFO leverage between 0.8x and 1.1x in the
next four years. This scenario already considers investments for
the new facility and high dividend pay-outs. In the past four
years, the company's average FFO leverage was 0.7x and the net
debt/EBITDA ratio was 0.3x.
DERIVATION SUMMARY
Ache's lack of geographic diversification, smaller scale and
relatively narrow research portfolio compared with top
pharmaceutical companies constrain its 'BBB' LC IDR, while the
concentration of revenues in Brazil together with the lack of
operating and financial assets abroad cap its FC IDR at the
Brazilian Country Ceiling of 'BB'. Ache's capital structure has
consistently been stronger than Fitch's 'BBB' portfolio and is
well-positioned in terms of leverage compared with most of the top
global pharmaceutical issuers that are rated 'A' or 'AA' by Fitch,
with average net leverage below 1.0 x.
Ache's National Scale Rating is the same rating category of
Eurofarma Laboratorios S.A (AAA[bra]/Stable), and both companies
are well positioned in the Brazilian pharmaceutical market
landscape and count on a conservative financial profile. Ache is
rated one notch higher than Blau Farmaceutica S.A.
(AA+[bra]/Stable). Compared with Ache, Blau has limited operational
scale; revenue concentration in a few products with a focus on the
nonretail segment. Both companies have strong credit metrics. Ache
is positioned two notches higher than Uniao Quimica Farmaceutica
Nacional S.A. (AA[bra]/Stable), the later has a good operational
scale and diversification, but Ache's capital structure and
financial flexibility are stronger.
KEY ASSUMPTIONS
-- Average volume growth of 12% per year from 2021 to 2023;
-- Average revenues growth of 15.5% per year from 2021 to 2023;
-- Capex of BRL804 million in 2021-2023, which includes
investments in the new plant in Pernambuco;
-- Dividend pay-out of 75% of the net income per year.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- For the FC and LC IDRs, positive rating actions are limited by
Brazil's Country Ceiling of 'BB' and 'BB-' sovereign rating.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Ache's credit ratios are very strong at the current rating
level, but unexpected events that move net debt/EBITDA beyond
2.0x or FFO-adjusted leverage beyond 3.0x could result in
negative rating action for the LC IDR;
-- Significant market share or brand deterioration;
-- Further negative rating action on Brazil's sovereign rating
and Country Ceiling could result in negative rating action on
Ache's FC and LC IDRs.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: Ache has historically maintained a robust
liquidity position. On Sept. 30,2021 Ache reported BRL131 million
of debt maturing up to December 2022 and cash and marketable
securities of BRL137 million, reinforced by an undrawn balance of
BRL270 million from a BRL300 million revolving credit facility
(RCF), a strong pre-dividend FCF generation and flexible dividend
payment to manage cash needs. Ache has BRL70 million of debt due in
2023 and BRL231 million in 2024.
Ache's total debt of BRL879 million was comprised of long-term
transactions from development banks such as Banco Nacional de
Desenvolvimento Economico e Social (BNDES), Banco do Nordeste and
others (51%), long-term debentures (45%) and others (3%).
ISSUER PROFILE
Ache is the fifth-largest pharmaceutical company in the Brazilian
retail market, and is a leader in the Brazilian prescription
segment with solid brand recognition and a diversified product
portfolio. Ache develops, manufactures and commercializes
off-patent and locally unpatented products.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
BRAZIL: Decree OK'd Allowing Retaliation on Trade Disputes
----------------------------------------------------------
The Rio Times reports Brazilian President Jair Bolsonaro has signed
a decree allowing the country to unilaterally retaliate in trade
disputes. The Brazilian government justified the move, saying the
World Trade Organization's Appellate Body was no longer functioning
because the United States was blocking new appointments. There are
no arbitrators to decide cases and appeals remain in a legal
vacuum.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Jair Bolsonaro is the current president, having
been sworn in on Jan. 1, 2019.
Standard & Poor's credit rating for Brazil stands at BB- with
stable outlook (April 2020). S&P's 'BB-/B' long-and short-term
foreign and local currency sovereign credit ratings for Brazil were
affirmed in December 2021 with stable outlook. Fitch Ratings'
credit rating for Brazil stands at 'BB-' with a negative outlook
(November 2020). Fitch's 'BB-' Long-Term Foreign and Local
Currency Issuer Default Ratings (IDRs) has been affirmed in
December 2021. Moody's credit rating for Brazil was last set at
Ba2 with stable outlook (April 2018). DBRS's credit rating for
Brazil is BB (low) with stable outlook (March 2018).
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C H I L E
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LATAM AIRLINES: Creditors' Panel Disagrees pm Negotiation Process
-----------------------------------------------------------------
LATAM Airlines Group S.A. and its debtor-affiliates submitted a
Third Revised Disclosure Statement with respect to the Joint Plan
of Reorganization dated Jan. 27, 2022.
Position of the Creditors' Committee
The Creditors' Committee has grave concerns about the Plan, which
it believes provides insufficient distributions to unsecured
creditors, is the result of a flawed and inappropriate process, and
unlawfully favors the Commitment Creditors and the Backstop
Shareholders at the expense of the Debtors' other similarly
situated impaired unsecured creditors.
The Creditors' Committee believes each creditor's vote is important
and encourages every creditor to timely cast a vote on the Plan.
The Plan cannot be confirmed unless it is accepted by impaired
creditors that hold both (1) claims totaling at least two thirds in
amount, and (2) a majority in number, of all claims voted in the
impaired class. If the majority in number and two thirds in amount
of claims held by unsecured creditors that actually vote do not
vote for the Plan, the Plan is unlikely to be confirmed by the
Court.
The Creditors' Committee's opposition to the Plan is based on its
belief that the Plan provides insufficient recoveries to LATAM
Parent's general unsecured creditors who will receive less than 20
cents for every dollar of Allowed Class 5 claims they hold based on
the Debtors' assumed plan value and claims estimates, unless they
are eligible to and elect to invest new money and grant the Plan's
releases to the Debtors and related parties.
The Creditors' Committee views the Plan as the result of a flawed
process that has not maximized the value of the Debtors' estates
and which transfers inappropriately high consideration to the
preferred Commitment Creditors in the form of an excessive 20%
backstop fee and a disproportionate allocation of the Plan's new
money share issuance at a discounted price, without a meaningful
market test.
The Creditors' Committee asserts that the Plan entitles Commitment
Creditors to obtain more than 85% of the New Convertible Notes
Class C which, at the Debtors' assumed $14 billion plan value,
effectively allows them to acquire shares in the reorganized
business at a 20.7% discount. In aggregate, the Creditors'
Committee asserts that the cash backstop fees (more than $743
million in cash) and discounts on shares equate to more than $1.587
billion in value which are not available to other general unsecured
creditors of LATAM Parent.
The Plan also affords the Backstop Shareholders and other
shareholders the opportunity to buy more than $1.3 billion of stock
in the reorganized business at a 13.7% discount using an assumed
plan value of $14 billion via the New Convertible Notes Class B and
another $800 million of stock in the reorganized business through
the ERO Rights Offering. The Creditors' Committee believes these
discounts result in the Plan diverting $345 million in value to
current shareholders at the expense of creditors.
The Creditors' Committee's concerns are compounded by what it
believes is the Plan's favorable treatment of the LATAM Parent 2024
Bonds and the LATAM Parent 2026 Bonds upon a purported second
recovery from LATAM Finance Ltd., a special purpose financing
subsidiary that issued such bonds. Thus, the Creditors' Committee
believes that the Plan inappropriately forces general unsecured
creditors to subsidize the Plan's distributions to the holders of
LATAM Parent 2024 Bonds Claims and LATAM Parent 2026 Bonds Claims.
Peuco repaid portions of the LATAM Finance Claim consistent with
the terms and schedule set forth in the indentures governing the NY
Law Bonds. The Creditors' Committee contends that the fact that the
intercompany loan agreements do not have a scheduled payment or
fixed maturity dates, and do not bear interest other than for
overdue amounts, demonstrates insufficient indicia of a genuine
debt obligation of Peuco to LATAM Finance. In the Creditors' view,
if the LATAM Finance Claim is disallowed, the LATAM 2024 Bond
Claims and the LATAM 2026 Bond Claims should rank pari passu with
the general unsecured claims in Class 5.
The treatment of Holders of Allowed Claims in Class 4 comprises and
depends on a combined recovery on account of their Allowed Claims
against both LATAM Parent and LATAM Finance Ltd. If the Court were
to order the substantive consolidation of LATAM Finance, Peuco and
LATAM Parent, or if the Court were to grant LATAM Finance Claim
Objection, the recoveries for Holders of the NY Law Bonds (Class 4
Claims) would be impaired and the recoveries for existing Holders
of Class 5 Claims would be improved.
The Creditors' Committee disagrees with the Debtors'
characterization of their plan negotiation process. The Creditors'
Committee consistently raised its concerns about the Debtors'
process with the Debtors and urged the Debtors to conduct a robust
and thorough marketing process (including to parties not currently
invested in the debt or equity), to include strategic buyers, and
not to pair backstop solicitation with votes on the plan.
The Creditors' Committee believes the Debtors' flawed process is
directly responsible for the excessive returns afforded to the
Commitment Creditors and the Backstop Shareholders under the Plan
and the Plan's many other defects which the Creditors' Committee
maintains violate the confirmation requirements of the Bankruptcy
Code. The Debtors disagree with the Creditors' Committee's
characterization of the plan negotiation process and other
characterizations.
The Creditors' Committee believes that the Debtors did not
seriously consider or engage with Azul with respect to its November
11th letter and related materials, including with respect to the
various aspects which the Debtors believed were lacking. The
Debtors assert that the Azul materials lacked fundamental and
necessary details, any analysis of threshold issues necessary to
consummate a restructuring transaction, any binding indications of
support, or even the most basic terms of a potential
restructuring.
The Amended Disclosure Statement does not alter the proposed
treatment for unsecured creditors:
* Class 5 consists of General Unsecured Claims against LATAM
Parent. Each Holder of an Allowed General Unsecured Claim against
LATAM Parent shall receive in full satisfaction, settlement,
discharge and release of its Allowed Class 5 Claim a distribution
pursuant to Class 5a Treatment, unless such Holder (excluding any
Ineligible Holders) opts into Class 5b Treatment. This Class will
receive a distribution of 16.3 to 19.3% of their allowed claims.
* Class 6 consists of General Unsecured Claims against Debtors
other than LATAM Parent, Piquero Leasing Limited and LATAM Finance
Ltd. Each Holder of an Allowed General Unsecured Claim against a
Debtor other than LATAM Parent, Piquero Leasing Limited or LATAM
Finance shall receive, in full satisfaction, settlement, discharge
and release of its Allowed Class 6 Claim (x) Cash equal to the
amount of such Allowed Class 6 Claim; (y) such other less favorable
treatment as to which the Debtors and the Holder of such Allowed
Class 6 Claim shall have agreed upon in writing or (z) such other
treatment such that the applicable Allowed Class 6 Claim will be
rendered Unimpaired. This Class will receive a distribution of 100%
of their allowed claims.
* Class 7 consists of the General Unsecured Claim against
Piquero Leasing Limited. The Holder of the Allowed General
Unsecured Claim against Piquero shall receive, in full
satisfaction, settlement, discharge and release of such Claim, (x)
the Piquero Consideration or (y) such other less favorable
treatment as to which the Debtors and the Holder of such Allowed
Class 7 Claim shall have agreedupon in writing. This Class will
receive a distribution of 16.3 to 19.3% of their allowed claims.
The Debtors and Reorganized Debtors, as applicable, shall fund
distributions under the Plan with: (i) Cash on hand, including Cash
from operations or asset dispositions; (ii) Cash proceeds from the
subscription of ERO New Common Stock pursuant to the ERO Rights
Offering Procedures, (iii) the New Convertible Notes Class A, (iv)
the New Convertible Notes Class C, (v) the Cash proceeds from the
subscription of the New Convertible Notes, and (vi) the proceeds of
the Exit Financing.
Counsel for the Debtors:
Richard J. Cooper, Esq.
Lisa M. Schweitzer, Esq.
Luke A. Barefoot, Esq.
Thomas S. Kessler, Esq.
CLEARY GOTTLIEB STEEN & HAMILTON LLP
One Liberty Plaza
New York, NY 10006
Telephone: (212) 225-2000
Facsimile: (212) 225-3999
About LATAM Airlines Group
LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise. It is the largest passenger airline in South
America.
Before the onset of the COVID-19 pandemic, LATAM offered passenger
transport services to 145 different destinations in 26 countries,
including domestic flights in Argentina, Brazil, Chile, Colombia,
Ecuador and Peru, and international services within Latin America
as well as to Europe, the United States, the Caribbean, Oceania,
Asia and Africa.
LATAM and its 28 affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in
Chile, Peru, Colombia, Ecuador and the United States are part of
the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as
bankruptcy counsel, FTI Consulting as restructuring advisor, Lee
Brock Camargo Advogados as local Brazilian litigation counsel, and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. The Boston Consulting Group, Inc. and The Boston
Consulting Group UK LLP serve as the Debtors' strategic advisors.
Prime Clerk LLC is the claims agent.
The official committee of unsecured creditors formed in the case
tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters
Jureller Southard & Stevens, LLP as conflicts counsel, UBS
Securities LLC as investment banker, and Conway MacKenzie, LLC as
financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is
the committee's Brazilian counsel.
The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as
counsel.
Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew
Glenn and partner Shai Schmidt, has been retained as counsel to the
Ad Hoc Committee of Shareholders.
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C O L O M B I A
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CONCESION RUTA: Fitch Keeps 'BB+' After El Condor Ratings Cut
-------------------------------------------------------------
Fitch Ratings has taken these rating actions on two toll road
transactions in Colombia:
-- P.A. Autopista Rio Magdalena's (ARM) COP915,500 million UVR
notes and COP278,000 million UVR loan 'BB+' and 'AA+(col)'
ratings placed on Rating Watch Negative (RWN);
-- P.A. Concesion Ruta al Mar's (RAM) COP522,000 million UVR
notes affirmed at 'BB+' and 'AA(col)'. The Rating Outlook is
Stable.
RATING RATIONALE
The rating actions reflect the projects' varied exposure to the
credit quality of Construcciones El Condor, S.A. (El Condor), who
has signed engineering, procurement and construction (EPC)
contracts with RAM and, in consortium with Constructura Meco S.A.
Sucursal Colombia (Meco, rated 'BBB+(pan)'/RWN), with ARM. During
the completion phase, the projects are exposed to the credit
quality of their EPC contractors, including El Condor. On Jan. 19,
2022, Fitch downgraded its national rating on El Condor to
'BBB-(col)' from 'BBB+(col)' and placed it on Rating Watch
Negative.
El Condor's rating downgrade reflects the continued weakening of
its credit profile, due to the company's tight liquidity position
and the pressure on its capital structure, characterized by
short-term debt maturities, which exposes it to risks of
refinancing. The Negative Watch reflects the uncertainty regarding
the execution of the financial strategies contemplated by the
company during the first half of 2022, which will allow it to
generate sufficient liquidity to meet its short-term obligations.
ARM
ARM is currently in the final phase of the implementation of the
remediation plan agreed with the lenders in June 2021 to remove
Meco from the consortium building UF1 and UF2. Once Meco is out of
the construction consortium in charge of building UF1 and UF2 of
ARM, El Condor is expected to assume the full scope of the EPC
contract in the short term, while an ultimate contractor is
selected for the construction of UF1. Following El Condor's rating
downgrade, ARM's ratings are constrained by El Condor's credit
quality, as per Fitch's 'Stronger' completion risk assessment,
given the project's qualitative attribute assessments and the
available security.
ARM informed Fitch that, as part of the remediation plan to remove
Meco from the scope of the EPC contract, the project sponsor
Aleatica S.A. has committed to provide additional liquidity in
order to support the construction progress and cover any cost
increases and delays as a result of the implementation of the
remediation plan. If materialized as planned, the latter is
expected to enhance the available security and result in an
improved assessment of the Completion Risk for ARM.
Further negative rating actions on El Condor may result in
equivalent rating actions for ARM, depending on the level of liquid
support provided by the project sponsor and Fitch's completion risk
assessment. The Negative Watch on ARM will be resolved once El
Condor's Negative Watch is resolved and Fitch assesses the new
available security, following the execution of the remediation
plan.
RAM
El Condor is RAM's sole contractor. Nonetheless, the 'Stronger'
assessment of completion risk due to its qualitative attribute
assessments and available security, means RAM's ratings are not
constrained by El Condor's credit quality. In this review, Fitch
has revised its assessment on completion risk to 'Stronger' from
'Midrange', driven by a revised assessment of the project's
Complexity, Duration and Scale subfactors. This revision reflects
the construction advance close to 80%, current duration and
remaining costs to complete the works. Depending on their
magnitude, further negative rating actions on El Condor would not
necessarily result in equivalent rating actions for RAM, supporting
the maintenance of its Stable Outlook.
KEY RATING DRIVERS
RAM
Completion Risk Reasonably Mitigated - Completion Risk: Revised to
Stronger from Midrange
Construction works are being performed by Construcciones El Condor
(BBB-(col)/RWN) under a fixed-price date-certain engineering,
procurement and construction (EPC) contract. The works comprise the
construction of short road stretches and minor bridges, and the
improvement of existing roads. Fitch views the complexity of the
construction works as low and without a critical path. The advanced
stage of construction and remaining duration and costs to complete
the works drive a strong assessment for completion, duration and
scale, according to applicable criteria.
According to the independent engineer (IE), the EPC contractor has
the experience and the ability to successfully develop the project.
The budget is adequate and includes contingency levels that are in
the middle range compared with similar projects. The sizes of the
performance bond and the retention provision of 15.8% and 5.0% of
the EPC contract price, respectively, are sufficient to cover cost
overruns should the EPC contractor need to be replaced.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
ARM:
-- Completion difficulties leading to delays and cost overruns
beyond those already contemplated in Fitch's scenarios;
-- Deterioration in Fitch's view regarding the credit quality of
ANI's grantor obligations;
-- Deterioration in the credit quality of the EPC contractors
that result in Fitch's completion risk rating below that of
the debt rating.
RAM:
-- Completion difficulties leading to delays and cost overruns
beyond those already contemplated in Fitch's scenarios;
-- Stagnant traffic performance in 2022 along with a slower and
extended recovery in the following years and/or significant
deterioration on available liquidity levels to face operating
and financial obligations;
-- Multi-notch downgrade of El Condor that result in Fitch's
completion risk rating below that of the debt rating.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
ARM:
-- A positive rating action is unlikely in the short term given
the rating is on Negative Watch.
RAM:
-- Traffic significantly overperforming Fitch's expectations,
resulting in an LLCR above 1.5x along with absence of pending
construction works.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of three notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
===================================
D O M I N I C A N R E P U B L I C
===================================
[*] DOMINICAN REPUBLIC: Government Seeks Deals With Qatar
---------------------------------------------------------
Dominican Today reports the Dominican Republic's Minister of Energy
and Mines and the Vice Minister of Hydrocarbons discussed before a
delegation from the State of Qatar the investment potential the
country has in the areas of electricity and fuels.
Both Antonio Almonte and Vice Minister Walkiria Caamano stressed
how important it would be for the Dominican Republic if the Arab
State were interested in exploring and investing in these two
lines, according to Dominican Today.
Almonte pointed out the government headed by President Luis
Abinader is interested in Qatar being aware of and collaborating
with the hydrocarbon exploration efforts in the Dominican Republic
and making investments in the renewable energy line, the report
notes.
"For us it is very important that you are interested in this type
of exploration and investment in the Dominican Republic," Almonte
said during a meeting with the delegation of officials and
entrepreneurs, according to the report.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
Fitch Ratings in December 2021 revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'. The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's also in December 2021 revised its outlook on the
Dominican Republic to stable from negative. S&P also affirmed its
'BB-' long-term foreign and local currency sovereign credit ratings
and its 'B' short-term sovereign credit ratings. The stable
outlook reflects S&P's expectation of continued favorable GDP
growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said. A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
=============
J A M A I C A
=============
[*] JAMAICA: Economy Recovering From COVID-19 Impact, PM Says
-------------------------------------------------------------
RJR News reports Prime Minister Andrew Holness says Jamaica is
recovering steadily from the economic fallout sparked by the
COVID-19 pandemic, based on the out-turns of several key
indicators.
The country recorded growth of 14.2% and 5.8% in the April to June
and July to September 2021 quarters, respectively, following an
18.4% economic contraction in the April to June 2020 period,
according to RJR News.
The report relates Mr. Holness was delivering the keynote address
at opening ceremony for the Jamaica Stock Exchange 17th
semi-virtual Regional Investments and Capital Markets Conference,
being held at The Jamaica Pegasus hotel in New Kingston.
As reported in the Troubled Company Reporter-Latin America on Nov.
25, 2021, Moody's Investors Service affirmed the Government of
Jamaica's long-term issuer and senior unsecured ratings at B2. The
senior unsecured shelf rating has also been affirmed at (P)B2. The
outlook on the ratings remains stable.
===========
M E X I C O
===========
DER NEUE: Fitch Withdraws Ratings
---------------------------------
Fitch Ratings has affirmed Der Neue Horizont Re, S.A. de C.V.'s
(Horizont Re) Insurer Financial Strength (IFS) Rating at 'B'. The
Rating Outlook is Stable. No rating actions were taken for the
national scale IFS Rating.
Concurrently, Fitch has withdrawn Horizont Re's international
rating for commercial reasons.
KEY RATING DRIVERS
There has been no material change in Horizont Re's credit profile
since the previous rating action on Nov. 17, 2021.
RATING SENSITIVITIES
Rating sensitivities for the international rating are not
applicable as the rating has been withdrawn. Rating sensitivities
for the national rating remains unchanged.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
MEXICO: Finance Head Says Talk of 'Technical Recession' Imprecise
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globalinsolvency.com, citing Reuters, reports Mexico's Deputy
Finance Minister Gabriel Yorio said that talk of a "technical
recession" in the country doesn't take into account
coronavirus-related economic volatility and global supply chain
issues.
Mexico's economy, the second-largest in Latin America, likely
shrank 0.2% in December compared with the same month a year
earlier, a preliminary official estimate showed, stirring concerns
the country may have slipped into a recession in the second half of
2021, according to globalinsolvency.com.
Meanwhile, a Reuters survey showed Mexico's economy likely
contracted in the last three months of 2021. That would mark a
second straight quarter of negative growth, which constitutes a
technical recession, the report notes.
"We feel like talk of a technical recession doesn't really capture
the economic dynamics we're seeing due to the effects of the
pandemic and above all else because of the supply shocks the world
is facing," Yorio said in a news conference. Global supply
bottlenecks, increased prices for raw materials, and higher costs
for ground transportation and sea shipping are weighing on the
economy, Yorio added, the report adds.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2022. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
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The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
.
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